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U.S. Files WTO Complaint Against China: Is Detroit Really at a Disadvantage?

Bernice Napach
Daily Ticker

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The world's largest economy is taking on the second largest economy once again.

The U.S. filed its third complaint against China at the World Trade Organization this year on Monday, alleging that China unfairly subsidizes its auto parts industry, putting U.S. auto parts manufacturers at a competitive disadvantage.

The complaint alleges that these subsidies totaled at least $1 billion from 2009 through 2011. It follows a previous filing against Chinese tariffs on U.S. car imports made in July.

Hours before the U.S. officially filed its latest WTO complaint, China went to the WTO for consultations about a new U.S. tariff law that allows the U.S. to impose import tariffs on certain Chinese goods.

Some observers including Republican presidential candidate Mitt Romney say the latest U.S. WTO filings against China is a political move designed to help President Obama win support in key auto manufacturing states like Ohio and Michigan.

Justin Hyde, senior editor of Motoramic, Yahoo's auto site, told The Daily Ticker there is "a certain amount of politics" involved in the filing but the White House wouldn't have filed the complaint with the WTO if it thought it was going to lose.

Hyde says the U.S. parts industry has "lost a lot of business to China" over the last few years as a result of rules requiring that a certain percentage of auto parts in Chinese made cars also be made in China. The latest WTO filing would allow the U.S. to impose duties on imported Chinese auto parts.

The U.S. is currently running an $8 billion trade deficit with China for auto parts, primarily for "low value" parts like alloy wheels that probably would have been imported from other countries anyway, says Hyde. In comparison, the U.S. trade deficit with Mexico and Japan is running at more than $11 billion each and growing, Hyde notes. These are imports of "high value" parts like engines and transmissions.

Whatever happens at the WTO, Hyde tells The Daily Ticker, the time will soon come when Chinese autos will be exported to the U.S.

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